The UK government faces a tax bill running into billions of pounds as North Sea oil and gas operators wind down production faster than anticipated, according to a former BP finance chief.
Brian Gilvary, who served on BP’s board for eight years until 2020 and now chairs Ineos Energy, says steep windfall taxes and restrictions on new drilling licences have pushed companies to abandon UK waters ahead of schedule. That acceleration matters because decommissioning costs, dismantling platforms and pipelines, sealing wells, can be offset against tax paid on earlier profits, triggering rebates for operators and a corresponding cost to the Exchequer.
Industry projections cited in Gilvary’s analysis suggest the combined bill from these rebates and lost future tax revenue could reach roughly £13bn by 2035. Figures from the North Sea Transition Authority, the industry’s regulator, show annual decommissioning spending has already climbed from £2bn in 2024 to an expected £3bn a year through the end of the decade, with around £28bn in total decommissioning outlay forecast for the same window.
Gilvary’s intervention follows BP’s announcement last week that it intends to sell off its North Sea assets entirely. The company’s chief executive, Meg O’Neill, said the basin no longer competes effectively for investment capital.
Writing on the subject, Gilvary argued that pushing fields to close early does more than end future tax income, it also pulls forward the moment at which decommissioning relief has to be paid out, adding strain to public finances in the near term.
He pointed to Norway as a contrast, noting that investment on its continental shelf is running at roughly ten times UK levels, despite the two countries sharing the same offshore basin.
Ashley Kelty, an analyst at Panmure Liberum, echoed the concern, warning that shutting down major offshore hubs risks stranding smaller nearby fields and forcing them to close too, which would accelerate the basin’s decline while shrinking the tax take.
The current windfall levy, known as the Energy Profits Levy, taxes oil and gas company profits in the UK at 78 per cent. Labour raised the rate after taking office and has since extended the levy’s expiry date from 2028 to 2030.
Union voices have also weighed in. Unite general secretary Sharon Graham has cautioned that a lack of clear domestic energy policy risks “hollowing out entire industrial communities,” while the GMB has argued that North Sea workers should not become “collateral damage” in the shift toward renewables.
Prime Minister Andy Burnham has indicated he may soften the government’s approach to oil and gas, telling reporters the UK cannot ignore its North Sea resources. Two stalled projects, Jackdaw and Rosebank, are seen as an early test of that shift; a public consultation on Jackdaw, which operator Adura says could supply around 6 per cent of UK gas demand, closes on Monday.
A government spokesman said the North Sea remained “a vital national asset” for jobs, growth and energy security, and that ministers were focused on supporting workers and communities through the transition.
The NSTA estimates total decommissioning across the North Sea could ultimately cost £48bn, with the Treasury’s rebate liability approaching £30bn. A 2019 National Audit Office report put potential costs even higher, estimating up to £77bn in historic terms, or around £101bn adjusted for today’s prices.
